IRVINE, CA—Healthcare, life sciences, tech and business services are well-positioned for further growth in Orange County as employment diversification continues to drive office vacancy lower, JLL research manager Jared Dienstag tells GlobeSt.com. According to a recent report from the firm, since the Great Recession, Orange County's economy has significantly diversified, which has led to lower vacancy rates and higher rents as companies from multiple industries absorbed space.

The report states that monthly average asking rents have reached $2.78 full service gross, per square foot, passing the previous 2007 peak of $2.74. Also, job sectors—with the exception of financial activities—have seen their employment numbers rise. Leading up to the recession, financial activities (primarily the mortgage industry) was responsible for much of the job growth and office occupancy at that time. This dependency left Orange County vulnerable to the recession.

Economic diversification in the region has placed the Orange County economy and office market in a more balanced position than in 2007. We spoke with Dienstag about how this diversification came about, which employment sectors look good long term and where growth opportunities are for office landlords in the future.

GlobeSt.com: When and how did Orange County's office market begin to diversify after the recession?

Dienstag: Economic expansion was first noticeable in 2011 and then kicked into high gear the following year. Prior to the recession, much of the local job growth, and thus demand for office space, primarily derived from the financial-services sector, particularly mortgage companies. According to the California EDD, the professional-and-business-services sector added 54,300 jobs since September 2010, which equates to 22% job growth. Meanwhile, educational-and-health services has added 35,300 jobs (21%), and leisure and hospitality added 47,400 jobs (28%). During this time, total Orange County nonfarm employment has grown 16% to 1,591,500.

GlobeSt.com: Which employment sectors hold the most promise for this market in the long run?

Dienstag: Healthcare, life sciences, tech and business services are well-positioned for further growth in Orange County. The rise in demand for healthcare services has increased the need for research and development from life-sciences firms. Expansion of the local tech industry from startups to established companies is vital to the local economy because it creates so many opportunities and helps put Orange County at the forefront of venture-capital and private-equity activity. As a branch of the tech industry, cybersecurity has become a huge concern for businesses and individuals and shows no signs of letting up. Orange County is becoming a significant market for these firms, including Cylance and CrowdStrike. As a greater number of companies elect to focus their time on core business functions, they are working more with outside firms who specialize in other business aspects such as payroll, talent development, benefits and other additional services. This is driving demand for the business-services industry.

GlobeSt.com: Which sectors may be small now, but offer growth opportunities for office landlords in the future?

Dienstag: While not small in Orange County, the engineering sector is in a position to increase its local presence. Southern California is a leader of engineering graduates, providing a strong labor pool for engineering firms. Tech subsectors, edtech and marketing tech could see continued growth if the economy remains on its current path. Kids are using technology for educational purposes at younger ages and are using it throughout the duration of their education, causing demand for edtech from the consumer and school levels to rise. Marketing tech, which encompasses business lines such as SEO, customer analytics, and the management of digital content, should also be watched. These services are needed by just about every industry, situating it to experience strong growth.

GlobeSt.com: What else should our readers take away from this research?

Dienstag: Orange County was hit hard during the recession, but it rebounded to become one of the fastest growing economies in the country. A diversified economy provides a strong foundation for Orange County and enables landlords to avoid being industry-dependent on their tenant mix and less exposed to economic down cycles, while attracting more commercial real estate investors to the market.

GlobeSt.com: When and how did Orange County's office market begin to diversify after the recession?

GlobeSt.com: Which employment sectors hold the most promise for this market in the long run?

GlobeSt.com: Which sectors may be small now, but offer growth opportunities for office landlords in the future?

GlobeSt.com: What else should our readers take away from this research?

Instant Insights /

Which Employment Sectors Hold the Most Promise for OC?

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